This is the time of year for forecasts. We all hear the pundits predicting what 2010 will bring in everything from Gross Domestic Product to Consumer Spending, Unemployment, Real Estate and everything else under the sun. Meanwhile, back here in the real world, many small business owners, investors, and even business brokers are wondering, “What will 2010 bring in small business sales?”

As a business broker and mergers and acquisitions intermediary, who has sold small business in Southern California for several years now, I feel as qualified as anyone to make a prediction. My approach is a qualitative review of others’ forecasts of factors that influence the buyers and sellers of small businesses in Southern California.

Let us begin by making some assumptions, based in part on the references at the end of this article. Let us assume that the U.S. economy will improve slowly, due to ongoing governmental risks, taxes and deficits. Credit will remain limited for small businesses and acquisitions. Unemployment will remain high this year. The real estate market, both commercial and residential, will continue to struggle. Southern California’s recovery will lag behind the U.S. recovery, due to its own state governmental challenges. Small business owners and investors will make the best of the situation.

Based on these assumptions, small business revenues and profits may improve slightly, from currently depressed levels, as businesses continue to cut costs and improve efficiency. Business owners who have been waiting for a robust recovery may finally give up, and decide to sell their companies. Those who want to give up their business for a steady job may have trouble finding one. Unemployment will also swell the ranks of business buyers, but leave them with less cash to invest. Business Sellers will remain the only “bank” available for financing business sales.

My 2010 forecast for business sales is more of the same, with maybe just a slight improvement from 2009. Sellers will continue to sell when they must, but at lower values due to the reduce profits of their companies. Buyers will “buy jobs,” but with lower down payments coming from their diminished savings. Business brokers and intermediaries will continue to put these deals together, encouraging their sellers to be reasonable on pricing and offer financing, and helping the buyers to envision and realize their dreams.

Alan Lippincott is a business broker and BestSoCal owner who welcomes calls to (877) 420-6478 and Email Inquiries.  His comments should be regarded as general in nature and not taken as advice without a personal consultation and signed agreement.

References

  1. WSJ article “Global M&A May Have Hit Bottom”: http://online.wsj.com/article/SB10001424052748704876804574628450435655062.html
  2. WSJ article “Turbulence Marks Global Outlook for 2010”: http://online.wsj.com/article/SB126256823198814331.html
  3. WSJ article “Real Estate Faces Tough Recovery Slog”: http://online.wsj.com/article/SB10001424052748703521904574614833750873314.html
  4. UCLA Anderson 2010 Forecast December Update: http://newsroom.ucla.edu/portal/ucla/ucla-anderson-forecast-modest-149722.aspx
  5. Grubb & Ellis 2010 Commercial Real Estate Forecast: http://www.jsonline.com/business/80674702.html